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Case Learning Objectives:Analyze and address the operations and supply chain issues a diverse product mix requiring different manufacturing processes creates.Differentiate between infrastructural operations decisions (i.e. day-to-day decisions and activities) and structural issues (i.e., strategic, involving investment)Identify operations policies and organizational structures required by a chosen operations strategy (i.e., matching manufacturing capability to the Customer Value Proposition (CVP) and product and process characteristics).Requirement: In four (4) total pages or less (including tables, charts, etc.) using Microsoft Word, analyze the following questions. For the capacity analysis, you can use the provided Microsoft Excel Spreadsheet but copy your Capacity Analysis into the Word document for submission.Write-up Questions:(15 points) Build a Resource-Based Operations Strategy Matrix for Morrison Company, identifying with different colors those resources and processes for each the Retail and Pharmaceutical product lines.(25 points) Using the Matrix as your referenceIdentify and assess the operational problems at The Morrison Company, andExplain the differences between the products (functional vs innovative), production and supply chain processes for the Pharmaceutical product line and the Retail product line.(25 points) Using the data in the case and the Student Spreadsheet providedBuild a Capacity Utilization analysis in Excel for both the product lines and the factory. What is your analysis of capacity utilization and how should it factor into your recommendations? You can separate out the capacity analysis for the Personalization volumes.Analyze the CAGR rates for both product lines. How does that, together with the capacity analysis, influence your recommendations?(10 points) What recommendations should you offer Shauna Breen about how to address the issues at The Morrison Company? Be specific about any policies, processes or organizational changes you propose. morrison_company_student_spreadsheet.xlsx the_morrison_company_.pdf Unformatted Attachment Preview Exhibit 1: Financial Summary Revenue Pharmaceutical Line Retail Line Total Revenue $ $ $ 36,199,296 18,072,512 54,271,808 COGS Pharmaceutical Line Retail Line Total COGS $ $ $ 21,865,627 13,580,185 35,445,812 Gross Margin $ 18,825,996 Operating Expenses GS&A Research & Development $ $ 7,562,000 4,800,000 Total Operating Expenses $ 12,362,000 EBITDA $ 6,463,996 Exhibit 3: Monthly Units Forecast, Planned, and Actual Output, 2010 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total Pharmaceutical Line Forecast 10,750 7,679 9,214 7,679 23,804 18,429 10,750 14,589 16,893 13,054 17,661 29,179 179,680 Aggregate production plan 15,357 15,357 11,518 15,357 15,357 11,518 11,518 15,357 15,357 15,357 15,357 15,357 172,769 Actual 14,419 12,722 16,115 16,115 10,178 11,874 11,874 13,570 11,026 16,963 14,419 15,267 164,542 Retail Line Forecast 5,953 5,694 8,800 8,541 9,836 16,306 11,130 5,694 8,800 14,753 10,871 19,412 125,792 Aggregate production plan 5,177 6,471 6,471 6,471 9,059 11,647 5,177 9,059 9,059 12,942 14,236 19,412 115,180 Actual 4,409 6,224 8,039 6,224 5,964 14,004 2,334 8,039 7,002 12,448 14,004 21,005 109,695 Note: Figures represent the number of smart label rolls (1,000 labels per roll) For the exclusive use of A. Alsadah, 2020. 4564 MAY 16, 2011 STEVEN C. WHEELWRIGHT PAUL MYERS The Morrison Company “Let’s meet tomorrow for breakfast to discuss your sense of what’s gone wrong and how we can fix it.” CEO Jason Robbins’s request echoed in Shauna Breen’s mind as she sat down at her desk to gather her thoughts. It was the end of her first day as The Morrison Company’s new Director of Operations. Morrison developed and manufactured radio frequency identification (RFID) tags known as smart labels for the retail and pharmaceutical industries. The company’s sales had boomed over the past year, and production levels had increased dramatically to meet monthly and quarterly shipping targets. However, an end-of-year push exacerbated manufacturing problems that had plagued management throughout the previous nine months. Fourth-quarter performance from RFID products aimed at retailers was lower than expected. Fortunately, stellar earnings from its pharmaceutical RFID line buoyed Morrison’s financial results for the year overall (Exhibit 1). Breen was an experienced operations manager hired for her successful track record of engineering dramatic turnarounds at several small manufacturing firms. She had begun the day with separate meetings with her direct reports followed by a thorough tour of the plant. While she had sought a new opportunity that would challenge her, what she heard and saw indicated that the company’s operations performance was even worse than she had anticipated. “This is a heck of a way to start the New Year!” she told herself as she fired up her laptop to prepare for the next morning’s meeting with Robbins. Company Background President and CEO Jason Robbins started The Morrison Company—named after his maternal grandfather—in 2003 just outside of Denver and was its sole owner. A serial entrepreneur, Robbins ________________________________________________________________________________________________________________ HBS Professor Steven C. Wheelwright and writer Paul Myers prepared this case solely as a basis for class discussion and not as an endorsement, a source of primary data, or an illustration of effective or ineffective management. This case, though based on real events, is fictionalized, and any resemblance to actual persons or entities is coincidental. There are occasional references to actual companies in the narration. Copyright © 2011 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School. This document is authorized for use only by Ali Alsadah in SCM 479 Summer 2020 taught by Gregory Collins, Arizona State University from May 2020 to Jun 2020. For the exclusive use of A. Alsadah, 2020. 4564 | The Morrison Company had sold his two previous businesses to private equity firms, and he expected to do the same one day with this venture. Robbins thought of the idea for The Morrison Company while attending his 20th business school reunion. He had listened to a presentation on emerging supply chain management trends including the use of RFID technology to track pallets and cases of goods after they left the shipping dock en route to downstream supply chain positions. After conducting extensive market research, Robbins assembled a team of highly experienced engineers to develop an initial line of products. He decided to target pharmaceutical firms since, according to its strategic industry scan, some had already begun to consider implementing smart tags. Coincidentally, the U.S. Food and Drug Administration (FDA) was preparing to issue the first guidelines for RFID pilot studies involving drugs, so the time was ripe for entering the market. The company began producing smart tags for pharmaceutical use in the summer of 2004. During the second half of 2007, Morrison expanded its product line to attract retailers. RFID Technology & Smart Tags Market Technology RFID technology combined transponders (i.e., tags), with varying capabilities to store, transmit, and receive data wirelessly, with devices known as readers, which received and transmitted the data via the reader’s antenna (Exhibit 2). Readers could be handheld and mobile or fixed and stationary. RFID tags enabled automatic identification, monitoring, and authentication of the objects to which they were attached. Data generated by RFID systems could be transferred to an information system for processing, analysis, and storage. Moreover, data stored on certain types of RFID tags could be changed, updated, and even erased. Unlike barcodes that required direct contact with a scanner, RFID tags did not need even a direct line of sight to the reader, only some level of proximity between the tag and the reader. High frequency (HF) passive RFID tags had a range of up to roughly one yard, while lower-priced ultra-high frequency (UHF) tags had much longer read distances. Each RFID tag consisted of an inlay embedded in various materials so that it could be fabricated into adhesive labels or more durable adhesive tags. Inlays consisted of a clear plastic film to which an integrated circuit (i.e., IC or “microchip”) and an antenna were affixed. RFID tag producers included firms that manufactured ICs, inlays, finished tags, and those that provide some or all of these capabilities. The inlay market was highly fragmented, and many small suppliers provided supplemental manufacturing capacity to larger ones. Smart Tags Market The total global market for RFID hardware, including smart tags, reached approximately $4.9 billion in 2010. Forecasts predicted that figure would increase at an 11.5\% compound annual growth rate (CAGR) to $8.5 billion by 2015. The most typical use or most frequent application of RFID tags was in such areas as supply chain management, security access and control, asset tracking, and contactless payment (e.g., EZ-Pass for highway tolls). Firms in highly regulated industries such as defense and pharmaceuticals were among the early adopters of RFID technology. Retail applications such as supply chain and inventory management accounted for approximately 6\%–7\% of global RFID revenues in 2010, and analysts believed that would rise to 10\% within five years. RFID tags offered retailers a way to track merchandise for stocking purposes, since they could provide near real time data on where products were in the distribution chain. Item-level tagging 2 BRIEFCASES | HARVARD BUSINESS SCHOOL This document is authorized for use only by Ali Alsadah in SCM 479 Summer 2020 taught by Gregory Collins, Arizona State University from May 2020 to Jun 2020. For the exclusive use of A. Alsadah, 2020. The Morrison Company | 4564 provided retailers with improved inventory visibility, accuracy, loss prevention, and operational efficiency—including reduced stock outs. Apparel retailers were among the leaders in adopting smart labels; an estimated 300 million labels were sold for that application in 2010. RFID smart tags were sold at prices that ranged from roughly $.09 to $.18 each in 2010, and prices had remained relatively flat compared to the previous year. Pricing was based on order volume, amount of memory on the IC, and the type of material used to package the inlay. Wal-Mart, which by 2006 had required its 200 largest suppliers to use UHF tags at the case-pack and pallet-level, was the prime driver behind efforts to lower RFID tag costs to $.05 or less apiece. The resulting size reductions, design changes, and other technological developments were leading to shorter product life cycles as new types of tags supplanted existing ones. This was especially true of UHF ICs, whose technology was much less mature than that of the older HF models. Product Lines: Retail & Pharmaceutical The Morrison Company specialized in producing RFID finished tags, also known as smart labels. The company competed against approximately 150 other manufacturers in the highly fragmented smart tags market. The company’s biggest competitors included Avery Dennison—one of the world’s largest manufacturers of self-adhesive technologies and applications—and Cenveo, the third-largest graphics communication company in North America. As competition to meet growing demand heated up, Morrison tried to add value by emphasizing responsiveness and speed. Breen learned that her predecessor had drafted a proposal to offer on-time delivery guarantees or reduced lead times for orders above a certain size, but had never presented the plan to Robbins. As of January 2011, The Morrison Company manufactured four varieties of smart tags. It offered basic and premium versions of both paper and synthetic labels; premium products offered special coatings that improved performance and used materials that offered greater resistance to scratching or smearing. For each variety, units were produced with three different types of adhesives (permanent, removable, and tamper-evident), in three standard shapes (round, rectangular, and square), and 18 sizes. Each inlay’s IC and antenna were specific to the smart tags’ intended application as well as the customer’s technology preference (e.g., HF vs. UHF). Morrison currently offered a choice of 6 different ICs and 10 antennae. Pharmaceutical Line Morrison’s original product line consisted of standard smart tags available in just two sizes and shapes. Its tags were specifically designed to meet the rigorous standards required by the DEA (the U.S. Drug Enforcement Agency) and some state regulators (notably California). The company worked with a major pharmaceutical company to identify detailed specifications and to develop and pilot test the initial set of products. In 2007, Morrison patented a manufacturing process that produced inlays whose performance was unmatched for accuracy, especially at the individual unitlevel. Within three years, Morrison had acquired a 30\% share of the pharmaceutical smart tag market. Global sales of RFID hardware to the pharmaceutical industry were projected to increase at a CAGR of 34\% from 2010 to 2015. Morrison’s marketing department projected similar growth of that magnitude for the company. RFID tags were becoming particularly important to drug makers for several reasons. In addition to the operational efficiencies gained by greater inventory visibility, pharmaceutical companies adopted smart tags to increase patient safety by fighting the proliferation of counterfeit drugs, reducing the risk of tampering, and tracking expiration dates. HARVARD BUSINESS SCHOOL | BRIEFCASES 3 This document is authorized for use only by Ali Alsadah in SCM 479 Summer 2020 taught by Gregory Collins, Arizona State University from May 2020 to Jun 2020. For the exclusive use of A. Alsadah, 2020. 4564 | The Morrison Company Drug companies valued smart tag performance and reliability over price. More than 85\% of Morrison’s pharmaceutical product sales contained HF chips, which were favored for their smaller size and better performance despite being almost double the cost of UHF tags with comparable features. The average price per unit was $.22. The only customization Morrison offered in this segment was optional label printing. In 2010 pharmaceutical sales of approximately $36.2 million represented two-thirds of Morrison’s annual revenue. Net earnings before taxes for the product line were $6 million. Retail Line The Morrison Company produced a second line of products for retailers. It faced considerably greater competition than did the pharmaceutical products, and price in this newly developing market was a primary factor in purchase decisions. Although initially offering only a small range of standard tags, by the end of the first year the company began to differentiate its smart labels through customization. It offered a choice of colors, finishes, and cut-to-order sizes and would even meet other specifications for especially large orders. With the acquisition of new technology in early 2009, Morrison began offering a new option known as “personalization” that consisted of custom printing on finished labels. Almost 85\% of the retail units sold had some type of customization. The average price per unit was $.11. As the cost of RFID tags dropped, item-level tagging in retail grew in popularity. As of 2010, more than 100 of the largest retailers required apparel manufacturers to tag each unit. Industry analyst ABI Research predicted a CAGR of 12.1\% by 2015 in demand for UHF tags, largely driven by a huge increase in retail apparel tagging. In addition to large chain stores, a growing number of Morrison’s retail customers were smaller, independent multi-unit retailers that sold apparel, footwear, home furnishings, or liquor. In 2010, the retail line accounted for one-third of the company’s total revenue. However, higher than expected production costs resulted in net income before taxes of $376 thousand—well below its target for the year. The company expected far fewer direct competitors for its retail line in the near future. It had recently purchased exclusive rights to a patented device that combined the inventory control capability of RFID with the theft deterrence functionality of retailers’ existing security systems. The planned new line of products with this technology had begun to attract the interest of the largest retail chains, some of whom had placed initial small orders for pilot programs. In a recent profile in RFID Journal, the leading industry publication, CEO Robbins declared “Our new retail products will make The Morrison Company a dominant player in that market just as we are today in pharmaceuticals.” The Manufacturing Process The Morrison Company based all its manufacturing-related activities in a single 28,000-squarefoot facility. It had moved there from a nearby space just prior to launching its retail product line. Located in a large industrial park in Aurora, Colorado, the building also housed the company’s engineering, marketing, and general administration departments. The possibilities for expansion in that location were limited: Morrison leased the building, and the surrounding lots had already been developed. The manufacturing process, which involved 60 hourly production employees, included the following six activities: (1) receiving, inspection, and inventory, (2) parts picking, (3) inlay fabrication and testing, (4) tag assembly and testing, (5) personalization [optional], (6) packaging. 4 BRIEFCASES | HARVARD BUSINESS SCHOOL This document is authorized for use only by Ali Alsadah in SCM 479 Summer 2020 taught by Gregory Collins, Arizona State University from May 2020 to Jun 2020. For the exclusive use of A. Alsadah, 2020. The Morrison Company | 4564 Morrison fabricated inlays with two fully automated RFID inlay assembly systems. Inlay production was rarely the system bottleneck. Setup required a specially trained operator to handle the ICs. Inlays used a variety of ICs, delicate silicon wafers typically priced at between 2.9 cents and 4 cents each depending on their size and purchase volumes. The placement of the IC and antenna each required precision. For instance, the tag would be likely to fail if contact between the IC and antennae were off by as little as one millimeter. Tag assembly was an automated process that involved mounting the inlay between two pieces of material known as a backing and a facing. Adhesive was applied to the backing, which when peeled away from the inlay allowed the label to be affixed to an item. The facing protected the antenna and IC from damage caused by scratches, heat, moisture, and other environmental factors. The company used 10 large, sophisticated machines to assemble the rolls of finished labels at a rate of up to 20,000 units per hour. Each required two operators to complete setups and to monitor performance tests. Four of the tag assembly machines had printing capability that enabled personalization. This step created an identity for each tag by printing bar codes and other information on the surface of the label. The machine could also print additional security features such as invisible ink markings. More than 70\% of retail product orders included personalization, compared to fewer than 15\% of pharmaceutical product orders. Production employees were responsible for quality assurance at each step of the manufacturing process. Receivers inspected all production supplies upon arrival and followed procedures to replace any broken or missing parts. The inlay sub-assembly and tag assembly steps included testing to verify that each product performed to specification. Materials handlers transported carts containing work-in-process from one activity area to the next and maintained the integrity of the separate orders. From conversations during her initial factory tour, Breen sensed a strong commitment to quality among the workers. Production Planning and Control Two production and inventory control managers, one purchasing manager, and one quality assurance manager reported to the Director of Operations, who in turn reported to CEO Jason Robbins. A Materials Resource Planning (MRP) system and a separate web-based order management system informed the management team’s decisions and actions. Transactions with vendors took place electronically, and established customers placed orders online. Robbins had considered investing in an Enterprise Resource Planning (ERP) system when launching the company, but determined that the implementation costs outweighed the benefits. During her initial tour of the production floor, Breen noted the absence of computer terminals and observed production lists with hand-written changes posted near each machine. Marc Siegel, the production manager for the retail line, explained to Breen how he and Al Robinson, who was responsible for the pharmaceutical line, established monthly production estimates (Exhibit 3). We start with the marketing department’s sales forecasts. Based on inventory projections and our knowledge of what is needed to produce each product, we determine the parts and labor required to meet the monthly targets. Then we both independently develop production plans for our respective product groups. Finally, we take into account the demand from known orders to create the master production schedule based on one eight-hour shift five days p ... Purchase answer to see full attachment